Lack of evidence hindering mortgage policy decisions

Mortgage Professionals Canada is calling on mortgage lenders concerned about risks in Canada’s mortgage and housing markets to make their lending data public.

“Mortgage lenders who are concerned about current risk-taking could very easily and very usefully add to the discussions by publishing data from their own businesses, especially with regard to Gross Debt Service Ratios and Total Debt Service Ratios,” the broker association wrote in its report, Looking for balance in Canadian housing and mortgage markets, written byChief Economist Will Dunning.

It continued: “To what extent do these ratios vary across communities? Are some communities showing more risk-taking than others? To what extent have these ratios changed over time? Are the ratios higher now than in the past?”

The suggestion was posed in the final section of the comprehensive 35 page report, which covered everything from foreign investment and the possibility of a housing bubble to Canada-wide research on resale conditions in various housing markets.

The association’s call for lenders to make their mortgage data more readily accessible was part of a section entitled “Does the government need to intervene again?”

“For the executives making public pronouncements about increased risk and the need for policy change, what does their evidence show them?” the association wrote. “They should open their books.”

Mortgage Professionals Canada argues that, if this data is provided, the government will realize Canadians are not taking “undo risks” and, as a result, further intervention may not be required.

“We suspect, but await proof, that a fulsome analysis will find that Canadians (borrowers and lenders) are not taking undue risks,” Mortgage Professionals Canada wrote. "The ultimate conclusion might be that, while low interest rates have resulted in more indebtedness, the burden of those debts has not become more onerous.”

And without this data, government may be at risk of harming the mortgage industry and, indeed, Canada’s housing market, if it pursues further housing policy aimed at curbing mortgages.

"Economic fundamentals can change," Mortgage Professionals Canada Chief Economist Will Dunning said. "One of those fundamentals is availability of finance. There is a risk that changes in policies of lenders or mortgage insurers that reduce access to mortgages could cause an unnecessary drop in housing demand and housing prices, and bring consequent economic damage."

The government is clueless and OSFI has no idea what its doing. Years ago they should have consulted plenty more bankers and mortgage brokers. Instead they just made up some new rules with no real idea of what risks are in the housing and mortgage markets.

They did away with true 65% equity lending on the 'A' side which was 99.9% safe for lenders from an overall risk standpoint. Instead, they allow 5% downpayment for college graduates at their 1st full time job and put the risk on taxpayers?